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How can I persuade the bank and Revenue that cash amounts I own were gifts from my mother, who died years ago?

Without any evidence of where the money comes from, you will run into challenges with anti-money laundering rules and taxation

Why was none of this money ever banked or put in something like an An Post or credit union account? Photograph: iStock

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Dominic Coyle
Sun Jun 9 2024 - 10:00

I have an unusual problem. Over the years I received cash/money from my mother and did not put it in the bank. I am now afraid that if I go to the bank and lodge this money, I may be asked questions such as where I got this money.

My mother is deceased and I believe deceased records – ie bank accounts – for seven years prior to death are retained. If I got some of this money 10 years plus prior to her death, then there is no proof of where I got the money.

I am also concerned that if I spend it on upgrading another property then Revenue may ask similar questions as the bank.

Mr DK

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I suspect this might not be as unusual as you suspect but it is certainly a problem.

Payments within families are a very regular feature of Irish life but, as you will have seen with Fiona Reddan’s article last week, depending on the nature of the payment, there can be tax implications.

And, as you suspect, Revenue of all people are always sceptical of money that simply appears with no evidence of transaction.

The situation is very clear. You can receive up to €335,000 from your parents over their lifetime, either in inheritance or by way of gifts amounting to more than €3,000 in any given year without becoming liable for tax.

That €3,000 figure is covered by something called a small gift exemption, which regular readers of this column will know well. You can receive €3,000 from any person in a calendar year without becoming liable to tax on it: if you receive a more valuable gift, the first €3,000 will be covered by the exemption and the balance counts against your lifetime capital acquisitions tax exemption threshold (that €335,000 figure I mentioned).

You can even receive multiples of that €3,000 figure as long as it comes to you from different people – say from your mother and your father, or an uncle, whatever, or in different years.

The small gift exemption is a very valuable relief but it really is advisable to make sure there is some paper trail to show what money has been paid and when

That’s the law but as with all things financial, you need to be able to persuade Revenue that this is where the money has come from. And the same is true for the banks. Modern anti-money laundering provisions mean that the bank has a responsibility to satisfy itself that any funds lodged with it are not the proceeds of crime.

And this is where I think you are going to run into a big problem.

I’m at a loss to understand why none of this money was ever banked or put in something like an An Post or credit union account. Apart from anything else, it is asking for trouble to keep that sort of money just lying around your home.

You don’t say how much is involved or the circumstances in which you received it but I am assuming that, if you are looking to use it for a big project, that it is a substantial enough figure. I am also assuming that on your mother’s death, you will have inherited some funds or other assets.

What I can tell you from personal experience, having interacted with Revenue on behalf of others, is that it will not be minded to accept retrospectively that this money is covered by the small gift exemption. If they accept at all in the absence of any evidence that it did come from your mother – and that is not guaranteed at all – it is likely that Revenue will grant you credit only for one year’s small gift exemption and set the balance against your lifetime limit. That might well have tax implications for you if other gifts or inheritances already registered with Revenue mean that this sum brings you above the tax exempt threshold.

If it does, tax is levied at 33 per cent.

[ Trying to maximise inheritance using the small gift exemption rule ]

The small gift exemption is a very valuable relief but it really is advisable to make sure there is some paper trail to show what money has been paid and when. In these days when online banking is nearly ubiquitous, online transfers should do that but for those still banking in more traditional ways, cheques, dated notes or other forms of paper trail would be advisable – or even something showing a regular pattern – such as a regular uncharacteristic payment at around the same time each year.

If you have bank statements from your mother’s account that show her withdrawing substantial sums which she then, presumably, gave to you in cash on different occasions, it would help your cause but otherwise I think you will struggle to persuade either the bank or the Revenue that this money should be treated as accumulated tax free gifts over a number of years.

In relation to your query about banks holding on to bank statements, the banks tell me that, under the Central Bank’s consumer protection code, which is currently under review, they need to retain records for six years from the time they stop dealing with a customer - because they have died or maybe because they left the bank.

So if you are her executor, you should be able to access your mother’s bank records as long as you have not left it beyond six years from her death. If you’re not the executor, things get stickier because, frankly, the bank has no reason to deal with you. You would need to get whomever is the executor to intercede on your behalf.

Whether it will serve any purpose really depends on how your mother paid you these regular gifts. If there are identifiable transactions, that helps: if it is simply a case of cash withdrawals which you are claiming aligns with the money you hold, you could find Revenue looking somewhat askance at that.

So what’s the alternative? The only thing I can see is that you could use other money that is already banked to pay for this property upgrade and use this hoard of cash to meet the day-to-day expenses that would normally come from your banked funds.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact number. This column is a reader service and is not intended to replace professional advice

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